The case for for-profit colleges and universities

Larry Penley Contributor
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The issues surrounding for-profit colleges and universities (as opposed to traditional colleges and universities) are a hot topic this summer. I certainly do not support any alleged unethical or illegal behavior on the part of the for-profits.  But at base, the real issues we confront in the U.S. boil down to ones of producing graduates who are qualified to enter the workforce and/or proceed to an advanced degree.  Many will remember when for-profit health care was considered a priori to be inferior to non-profit healthcare.  Those days have passed.  We now judge for-profit and nonprofit healthcare providers against the same criteria: outcomes.  The time has come to do the same with colleges and universities.

Despite recent media stories that have tried to define the problems of higher education only in terms of student debt and shortcomings within the for-profit sector, these schools offer opportunities that should be embraced as part of the solution to the productivity challenges of higher education.

A superficial dismissal of for-profit education — or the imposition of ill-conceived and untested rules that uniquely penalize for-profit schools and the students who attend them — is not the answer.  The for-profit sector is, and will continue to be, part of the solution that the U.S. needs to enhance its global competitiveness and the competitiveness of individual states.

A 2007 joint report from the National Center for Public Policy and Higher Education (NCPPHE) and the National Center for Higher Education Management Systems (NCHEMS) reported, “The knowledge economy is unforgiving for individuals who do not have education or training beyond high school — and for communities, states, and nations that do not have high percentages of their population with some education or training beyond high school.”  Along with growth in technology, a supply of well-educated citizens is critical to long-term economic growth and global competitiveness.  At one point we led the world in the number of 25- to 34-year-olds with college degrees; now, according to a recent New York Times report, we rank 12th among 36 developed nations.

The fundamentals of the modern system of non-profit higher education are largely unchanged from those of the medieval universities of the 11thand 12thcenturies which, in turn, had their roots in the monastic schools that preceded them.  The for-profit universities and schools represent a very considerable — and troubling for some — departure from the historic roots and traditional approach of non-profit higher education.  The joint report from the NCPPHE and NCHEMS urged that the recent, additional federal funding be used — not for back-filling operating budgets — but for departing from the traditional approach with investments in productivity-related redesign of large undergraduate courses and general education sequences along with capital investments to increase physical plant efficiency, redesign graduate education for increased financial self-sufficiency, and eliminate subsidies for undergraduate programs of marginal quality.

It is very difficult; indeed it is virtually impossible, in the modern non-profit college or university to make fundamental change.  Change usually does little more than tinker around the edges of existing classes, programs, and processes.  Fundamental change, when proposed, often rankles faculty members, who are generally dedicated to maintaining a hold on the existing process and the outcomes that process is producing.

It is unlikely that state funding of public higher education will increase in the foreseeable future, so changes will be required which are far more transformative than the tinkering with which we are all too familiar.  Dennis Jones, the executive director of NCHEMS, has been particularly vocal about the challenges faced by public higher education in increasing its productivity.  He has observed that neither states nor students can afford to pay for the expansion of traditional higher education in order to meet the U.S.’s need for increased enrollment in colleges and universities and the concomitant productivity improvements.

It is not surprising that for-profit, private sector institutions are adopting these principles which, by the way, they have accomplished without state subsidies.  In addition to focusing on majors and programs with high demand, redesigning courses and curricula using increasingly sophisticated digital technology, having an eye for market-driven, customer-focused services, and offering programs that are primarily job related and career focused, they are at once meeting their for-profit needs and providing better outcomes for their students.

Because of their for-profit, corporate structure — and their recent success, the more well-established of career-oriented colleges now have the capital for investment in further innovation and productivity improvements that traditional, public and private colleges and universities lack.  They should be judged, not by their corporate status, but by their capacity to innovate and the quality and success of their graduates.

Larry Edward Penley is past president of Colorado State University, past dean of the W.P. Carey School of Business at Arizona State University and author of the blog Access With Success.